...Short essay on the negotiable instruments in business law The law relating to “negotiable instruments” is contained in the Negotiable Instruments Act, 1881. The Act extends to the whole of India. The Negotiable Instruments Act, 1881, has been amended for more than a dozen times so far. The latest in the series are: (i) the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (effective from 1st April, 1989), and (ii) the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 (effective from 6th February, 2003). The provisions of all the Amendment Acts have been incorporated at relevant places in Part IV of this book. The Negotiable Instruments Act, 1881, as amended up-to-date, deals with three kinds of negotiable instruments, i.e., Promissory Notes, Bills of Exchange and Cheques. Definition: The word negotiable means ‘transferable by delivery,’ and the word instrument means ‘a written document by which a right is created in favour of some person.’ Thus, the term “negotiable instrument” literally means ‘a written document transferable by delivery.’ According to Section 13 of the Negotiable Instruments Act, “a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.” “A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees”...
Words: 1111 - Pages: 5
...A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document. More specifically, it is a document contemplated by or consisting of a contract, which promises the payment of money without condition, which may be paid either on demand or at a future date. The term can have different meanings, depending on what law is being applied and what country it is used in and what context it is used in. Examples of negotiable instruments include promissory notes, bills of exchange, banknotes, and cheques. Because money is promised to be paid, the instrument itself can be used by the holder in due course as a store of value. The instrument may be transferred to a third party; it is the holder of the instrument who will ultimately get paid by the payer on the instrument. Transfers can happen at less than the face value of the instrument and this is known as discounting; this may happen for example if there is doubt about the payer's ability to pay. Common prototypes of bills of exchanges and promissory notes originated in China. There, in the 8th century during the reign of the Tang Dynasty they used special instruments called feitsyan for the safe transfer of money over long distances.[1] Later such document for money transfer used by Arab merchants, who had used the prototypes of bills of exchange – suftadja and hawala in 10–13th centuries, then such prototypes had been used by Italian...
Words: 3090 - Pages: 13
...issues. In the first fact pattern the issues presented are holder in due course, negotiable instrument, ordinary contract principles, and estoppel. In the following fact pattern, the issue presented is surety versus guaranty. The issues will be solved by analyzing the law of the specific topic or term. First State Bank of Gallup was trying to collect from the maker of the note, in this case Daniels, because Clark defaulted on the loan after several payments. Daniel refuses to pay arguing that the note was a nonnegotiable instrument and therefore invalid in the hands of the bank. For First State Bank to able to collect from Daniels, has to be a holder in due course if the note is a negotiable instrument. Under the U.C.C. – Article 3 – a holder in due course means the “holder of an instrument if: the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306, and (vi) without notice that any party has a defense...
Words: 1393 - Pages: 6
...law LAW 504 PANCITO, Hazeleen Rose B. 3:30-5:30 PM Title I. - Negotiable Instruments in General Article I. - Form and Interpretation. SEC. 1. An instrument to be negotiable must conform to the following requirements: 1. It must be in writing and signed by the maker or drawer. 2. Must contain an unconditional promise or order to pay a sum certain in money. 3.Must be payable on demand or at a fixed or determinable future time. 4. Must be payable to the order or to bearer; and, 5. Where the instrument is addressed to a drawee,he must be named or otherwise indicated therein with reasonable certainty. Writing And Signature Writing and signature of maker or drawer are essentialto negotiability. Our natural conception of a negotiable instrument is that of a written paper. "Writing" includes print.12 The substance of the impression may be ink or lead.13 The former is of course preferable from the standpoint of sound and safe business practice. Signature. An instrument to be negotiable must be signed. "No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name." Example 8. Anotesigned "Western Novelty Co., Unincorporated" binds all who go under that trade name, assuming that the note is given under the authority of those sought to be held. Printed or lithographed signature is a legal...
Words: 2010 - Pages: 9
...THE NEGOTIABLE INSTRUMENT LAW SECTION . 5. Additional provisions not affecting negotiability. - An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which authorizes the sale of collateral securities in case the instrument be not paid at maturity; or (b) Authorizes a confession of judgment if the instrument be not paid at maturity; or (c) Waives the benefit of any law intended for the advantage or protection of the obligor; or (d) Gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate any provision or stipulation otherwise illegal. Acts in addition to payment of money A negotiable instrument must be payable in “a sum certain in money.” (1) General Rule. – As a general rule, the instrument is non-negotiable if it contains a promise or order to do any act in addition to the payment of money. (par. 1.) The prohibition is based on the fact that while one could be indorsed, the other would have to be assigned. (see Sec. 30) EXAMPLES: “I promise to pay or order P1,000.00 and to deliver a horse.” (2) Exceptions. – The law, however, gives exceptions (Sec. 5 [a to d.] to the general rule. a. Sale of collateral securities. EXAMPLE: “I promise to pay P or order the sum of P10,000.00 on November 25,2004...
Words: 682 - Pages: 3
...can sue on a negotiable instrument unless he is named therein as the payee or unless he becomes entitled to it as indorsee or becomes the bearer of an instrument payable to bearer. In the Full Bench case reported in Subba Narayana Vathiyar v. Ramaswami Aiyar,1 it has been held that in a suit on a negotiable instrument by the payee or indorsee, it is not open to the defendant to plead that the plaintiff is a mere benamidar not entitled to payment with a view to show that the note has been discharged by payment to real owner. Again in the Full Bench decision of the Patna High Court in Bacha Prasad v. Janaki,2 it has been held that a person who is not a holder of a negotiable instrument cannot maintain a suit for recovery of money due under it even though holder is admittedly the benamidar and is impleaded in the suit. In the said decision, it has also been held that "a beneficiary cannot be called a holder of the instrument and payment to him cannot discharge the maker thereof unless the case falls under section 82(c) of the Act". So also, it has been held in the decision reported in Subharaya v. Abiram,3 that a beneficiary does not become a holder of the instrument even upon getting a declaration that he is the beneficial owner and the payee is only a benamidar. In this connection it has to be noted that Allahabad and Rajasthan High Courts have taken a slightly different view and held that in certain cases a beneficiary may maintain a suit on a negotiable instrument "if holder is...
Words: 16119 - Pages: 65
...SUMMARY JUDGMENT The above case came before the Court on the defendant’s motion for summary judgment filed on August 1, 2006, in response to the debtor-plaintiff’s complaint alleging the creditor-defendant violated the automatic stay [i.e. 11 U.S.C. § 362(a)] by cashing the plaintiff’s check after she filed a petition for relief under Chapter 13 of the U.S. Bankruptcy Code. The defendant avers it did not violate the automatic stay because of the exception provided in 11 U.S.C. § 362(b)(11). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. The Court heard oral arguments on September 12, 2006 and directed the parties to file additional briefs dealing with whether the check at issue qualified as a negotiable instrument. For the reasons stated below, the 1 Case 06-40087-JJR Doc 31 Filed 10/26/06 Entered 10/26/06 08:56:27 Document Page 1 of 10 Desc Main Court finds the motion for summary judgment is due to be GRANTED. Background On April 15, 2006, the plaintiff received a “payday loan” for $500.00 from the defendant. In exchange for the $500.00 loan, the plaintiff gave the defendant a check for $587.50, which was intended to pay the principal of the loan plus interest and fees. The defendant agreed to hold the check until April 29, 2006. On May 9, 2006, the debtor-plaintiff filed for Chapter 13 bankruptcy relief. For purposes of this summary...
Words: 3439 - Pages: 14
...Assignment Topic: Laws that Affecting Business Name: Sumon Roy ID: 4050 MBA (Evening Program) Department of International Business University of Dhaka Submission Date: Saturday, 17th May 2010. Table of Contents: Contents | Page | Introduction | 1 | Definition of Business, Law & Business Law | 2 | Sources of law | 3 | Different laws affecting business | 6-11 | Laws regarding commerce in Bangladesh | 12 | Laws regarding Industry in Bangladesh | 13 | Conclusion | 14 | Introduction: In the present world business plays an important role in every sphere of life. Business determines one’s life style, standard of living, education and even cultural standard. So to lead a bette-r life we need to understand business and study business. Business is dynamic – always changing. Coping with both predictable and unpredictable events can be easier, more efficient, and less traumatic if we understand business. Study of business will help us to understand that today national economies are no more independent entities rather interdependent and taking an uniform global shape, economic depression in U.S.A. has an impact on the whole world, business and global warming are not different issues, war in Iraq or Afghanistan has some kind of link with business, China becoming a factor in the world economy because of excellent business skill and the system known as “Free Enterprise”. However the road to success will be easier for those who understand how business...
Words: 2215 - Pages: 9
...In India, there is reason to believe that instrument to exchange were in use from early times and we find that papers representing money were introducing into the country by one of the Mohammedan sovereigns of Delhi in the early part of the fourtheenth century. The word 'hundi', a generic term used to denote instruments of exchange in vernacular is derived from the Sanskrit root 'hund' meaning 'to collect' and well expresses the purpose to which instruments were utilised in their origin. With the advent of British rule in India commercial activities increased to a great extent. The growing demands for money could not be met be mere supply of coins; and the instrument of credit took the function of money which they represented. Before the enactment of the Negotiable Instrument Act, 1881, the law of negotiable instruments as prevalent in England was applied by the Courts in India when any question relating to such instruments arose between Europeans. When then parties were Hindu or Mohammedans, their personal law was held to apply. Though neither the law books of Hindu nor those of Mohammedans contain any reference to negotiable instruments as such, the customs prevailing among the merchants of the respective community were recognised by the courts and applied to the transactions among them. During the course of time there had developed in the country a strong body of usage relating to “hundis”, which even the Legislature could not without hardship to Indian bankers and merchants...
Words: 8689 - Pages: 35
...the Uniform Sales Act, the Negotiable Instruments Law, the Uniform Warehouse Receipts Act, the Uniform Bills of Lading Act, the Uniform Stock Transfer Act, the Uniform Trust Receipts Act, and numerous other statutes. Massachusetts thus became the second state to enact the Code, following the lead of Pennsylvania, where the Code, enacted in April 1953, took effect on July 1, 1954. In March 1958 the Code was enacted in Kentucky, effective July 1, 1960. Proposals to enact the Code will undoubtedly come before legislatures in other states in the course of the next few years, and it seems likely that several other states will join the procession at their 1959 sessions (Braucher, 1958). The Uniform Commercial Code (UCC or the Code), first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America. The Uniform Commercial Code, or UCC, is a very large collection of legal rules regarding many important business, or “commercial,” activities. The UCC originally was created by two national nongovernmental legal organizations: the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) (Steingold, 2013). As the word “Uniform” in its title suggests, a primary purpose of the UCC is to make business activities more predictable and efficient by making business laws highly consistent...
Words: 3509 - Pages: 15
...create legal obligation only are contracts. This validity of an enforced able agreement depends upon whether the agreement satisfies the essential requirements laid down in the acts. Section 10 lays down that ‘all the agreement are contracts if they are made by the free consent of the parties competent to contract for a lawful object and are not hereby expressly declared to the void’. The following are the essentials: a) Agreement: An agreement which is preliminary to every contract is the outcome of offer and acceptance. An offer to do or not to do a particular act is made by one party and is accepted by the other to whom the offer is made the we say that there is meeting of the mind of the parties. Such a position is know as consensus ad idem. b) Free consent: The parties should agree upon the same thing in the same sense and their consent should be free from all sorts of pressure. In other words it should not be caused by coercion, undue influence, misrepresentation, fraud or mistake. c) Contractual capacity: The parties entering into an agreement must have legal competence. In other word they must have attained the age of majority should be of sound mind and should be disqualified under the law of the land. A contract entered into between the parties having no legal capacity is nullity in the eyes of laws. d) Lawful consideration: There must be consideration supporting every contract. Consideration means something in return for something. It is the price for the promise. An...
Words: 12221 - Pages: 49
...NEGOTIABLE INSTRUMENTS ACT,1881 Definition of a Negotiable Instrument. The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. The Act does not affect the custom or local usage relating to an instrument in oriental language i.e., a Hundi. The term "negotiable instrument" means a document transferable from one person to another. However the Act has not defined the term. It merely says that "A .negotiable instrument" means a promissory note, bill of exchange or cheque payab1e either to order or to bearer. [Section 13(1)] A negotiable instrument may be defined as "an instrument, the. property in which is acquired by anyone who takes it bona fide, and for value, notwithstan~ing any defect of title in the person from whom he took it, from which it follo~s that an instrument cannot be negotiable unless it is such and in such a state that the true owner could transfer the contract or engagement contained therein by simple delivery of instrument" (Willis- The Law of Negotiable Securities, Page 6). According to this definition the following are the conditions of negotiability: (i) The instrument should be freely transferable. An instrument cannot be negotiable unless it is such and in such state that the true owner could transfer by simple delivery or endorsement and delivery. (ii) The person who takes it for value...
Words: 15663 - Pages: 63
...NEGOTIABLE INSTRUMENTS ACT,1881 Definition of a Negotiable Instrument. The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. The Act does not affect the custom or local usage relating to an instrument in oriental language i.e., a Hundi. The term "negotiable instrument" means a document transferable from one person to another. However the Act has not defined the term. It merely says that "A .negotiable instrument" means a promissory note, bill of exchange or cheque payab1e either to order or to bearer. [Section 13(1)] A negotiable instrument may be defined as "an instrument, the. property in which is acquired by anyone who takes it bona fide, and for value, notwithstan~ing any defect of title in the person from whom he took it, from which it follo~s that an instrument cannot be negotiable unless it is such and in such a state that the true owner could transfer the contract or engagement contained therein by simple delivery of instrument" (Willis- The Law of Negotiable Securities, Page 6). According to this definition the following are the conditions of negotiability: (i) The instrument should be freely transferable. An instrument cannot be negotiable unless it is such and in such state that the true owner could transfer by simple delivery or endorsement and delivery. (ii) The person who takes it for value...
Words: 15663 - Pages: 63
...Due Course’ shortens considerable the heavy English equivalent ‘bona fide holder for value without notice’ and both the Indian and English Acts have adopted this phrase. Sec. 9 of the Negotiable Instruments Act stresses on a more stringent condition on a Holder in Due Course as compared to one under Section 29 (1) (b) of the Bills of Exchange Act, 1882. HE must not only have acquired the bill, note or cheque for valid consideration but should have acquired the instrument without having sufficient cause to believe that any defect existed in the title of the person from whom he received the instrument. This condition requires that he should act in good faith and with reasonable caution. However, just failure to prove bona fides, or absence of negligence on his part would adverse his claim. Section 9 of the Negotiable Instrument deals with the concept of Holder In Due Course. It is essential that a person who claims to be a holder in due course must show that he collected the instrument for valuable and lawful consideration, but Court cannot look into such lawful and valuable consideration. However, where the bona fides of the transaction is impeached, the extent of the consideration given is a factor that the court will consider in determining the question of bona fides. Consideration is something which not only party regards but the law can regard as having some value. It can be either positive in that, it requires doing of something or negative in that, it requires forbearance...
Words: 1714 - Pages: 7
...Question 1: Explain the term negotiable instruments and briefly state its types. Negotiable instrument is a document that constitutes an obligation to pay a sum of money at a future date or on demand. According to Justice Willis, “a negotiable instrument is one, the property in which is acquired by anyone who takes it bona fide and for value notwithstanding any defects of the title in the person from whom he took it”. Any document is capable of being called a “negotiable instrument” if the following conditions are met: 1. The holder of the instrument may sue in his/her own name. 2. Title to the instrument must pass on delivery, or on delivery and endorsement. 3. A "holder in due course" takes the instrument free from the defects in title of his/her predecessors. Essential Features of a Negotiable Instrument: 1. A Negotiable Instrument is a written instrument 2. Signed by the maker or drawer of the instrument A signature may be any symbol made by the maker or drawer with the present intention to be a signature. 3. It must contain an unconditional promise or order to pay A mere acknowledgment of a debt is not sufficient without evidence of an affirmative undertaking on the part of the debtor to repay the debt. 4. An exact sum of money (with or without interest in a specified amount or at a specified rate) must be stated. Fixed amount means an amount that can be determined from the face of the instrument. Payable in money means the medium of exchange authorized or...
Words: 2141 - Pages: 9
